Question
Estimating Share Value Using the DCF Model Following are forecasts of Target Corporations sales, net operating profit after tax (NOPAT), and net operating assets (NOA)
Estimating Share Value Using the DCF Model
Following are forecasts of Target Corporations sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 2, 2019, which we label fiscal year 2018.
Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal places.
| Reported | Forecast Horizon Period | Terminal | ||||
|---|---|---|---|---|---|---|
| $ millions | 2018 | 2019 | 2020 | 2021 | 2022 | Period |
| Sales | $76,056 | $79,124 | $83,780 | $87,234 | $92,296 | $93,428 |
| NOPAT | 3,269 | 4,102 | 3,572 | 4,451 | 3,939 | 4,717 |
| NOA | 23,720 | 24,197 | 26,107 | 26,677 | 28,711 | 28,571 |
Answer the following requirements with the following assumptions:
| Assumptions | ||
|---|---|---|
| Terminal period growth rate | 2% | |
| Discount rate (WACC) | 7.63% | |
| Common shares outstanding | 517.80 | million |
| Net nonoperating obligations (NNO) | $12,423 | million |
Estimate the value of a share of Target common stock using the discounted cash flow (DCF) model as of February 2, 2019.
| Reported | Forecast Horizon | Terminal | |||||
|---|---|---|---|---|---|---|---|
| ($ millions) | 2018 | 2019 | 2020 | 2021 | 2022 | Period | |
| Increase in NOA | Answer
| Answer
| Answer
| Answer
| Answer
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| FCFF (NOPAT - Increase in NOA) | Answer
| Answer
| Answer
| Answer
| Answer
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| Present value of horizon FCFF | Answer
| Answer
| Answer
| Answer
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| Cum. present value of horizon FCFF | Answer
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| Present value of terminal FCFF | Answer
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| Total firm value | Answer
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| NNO | Answer
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| Firm equity value | Answer
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| Shares outstanding (millions) | Answer
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| Stock price per share | Answer
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The Handbook Of Financial Communication And Investor Relations
Authors: Alexander V. Laskin
1st Edition
1119240786, 978-1119240785
